The Panama Papers Rock the Offshore World
In just the last 24 hours, a massive information leak from Panamanian firm Mossack Fonseca, known as “The Panama Papers,” has spread like wildfire through news sources across the world. The leak contains millions of documents detailing the offshore accounts and structures of the firm’s clients, including some of the world’s wealthiest businessmen and even world leaders, such as Iceland’s Prime Minister. National governments, such as that of Australia, have already launched investigations of their citizens who have been implicated in the leak. While many of the firm’s clients set up complicated offshore structures specifically for maintaining privacy regarding their assets, they are now under greater scrutiny than ever before.
What’s most interesting in the articles being posted online at record pace, is the varying levels of understanding that commentators and reporters have of offshore companies. One writer asks, “Why would anyone want to have multiple offshore companies?” Another says, “The only reason to have such complicated structures is to hide one’s assets.” Such blanket statements are not only inaccurate, but can be scary for those using offshore structures for totally legitimate reasons. For many, the offshore world has always carried the connotation of illegality and deception, and this massive scandal will likely deepen that sentiment. In fact, as is typical of our increasingly reactionary governments, I would not be surprised to see new legislation implemented in many countries across the world. But is it necessary?
One of the most striking things about the Panama Papers published as part of the Mossack Fonseca leak is the list of clients, including world leaders and their closest associates. As governments such as Russia and Mexico, long accused of corruption, seek to improve their image, this leak reinforces the arguments of cronyism levied against those countries’ leaders. The Panama Papers scandal is likely to continue for quite a while, as investigators go through millions of documents seeking answers and proof of wrongdoing. There are already calls for the Prime Minister of Iceland to resign, but in a statement he asserted that the accounts were all appropriately reported, and all necessary taxes had been paid. Time will tell whether he’s telling the truth, but if he is, it will be very interesting to see where the conversation goes.
As many Escape Artist readers know, offshore structures are an essential part to a successful asset protection strategy, but the Panama Papers case really emphasizes the need to make sure one is complying with all relevant laws. When done with a legitimate professional in a legal way, offshore structures and corporations are integral to protecting financial security. It’s interesting that so many world leaders have attempted to crack down on the legitimate offshore world, when it has now come to light that many have been engaging in possibly illegal uses of the same system. There will certainly be consequences associated with the Panama Papers leak, and most likely not just for the individuals caught hiding their money. This is a situation that we will be following closely at Escape Artist, so check back for updates as the situation unfolds.